Objectives

This class covers the most important topics in modern macroeconomics. The topics discussed include theories of consumption, investment, money and monetary and fiscal policy. Each individual topic will be covered through lectures, applications and exercises.

Contents

There are two central concepts in modern macroeconomics, which will pervade all the topics we cover. First, we will construct theories where agent's expectations are determined endogenously and rationally. We will think about a representative agent who will react to her environment and formulate expectations about future developments, which in turn may affect today's behavior. For instance, the expectation that inflation will be high in the future partly conditions current salary demands. And inflation expectations are typically formed on the basis of what is rationally expected from the Central Bank. Second, we will develop methodologies to analyze dynamic decisions, whereby making a choice today has an effect on tomorrow, and is decided accordingly. For instance, the decision to save and invest today will augment tomorrow's productive capacities, and increase income then, at the cost of consumption today. Both concepts - rational expectations and dynamic programming - are absolutely central to modern macroeconomic analysis, and beyond. Its applications range far and wide, from financial economics to policy making. Thus, whether you plan a career in policy-making circles, international institutions, banking and finance or even the industry, these concepts will come in handy at one point or another.

References

There are no established exhaustive textbooks in macroeconomics. Nevertheless, I will often refer to Advanced Macroeconomics by David Romer, which is technically proficient, but not at the expense of intelligibility, and to Macroeconomic Theory by Michael Wickens.

Evaluation

First attempt

Exam:

Written 3h00 hours

Documentation:

Not allowed

Calculator:

Not allowed

Evaluation:

Written exam, 3 hours. Bonus grades are based on homework and class participation. Final grade=max(25%bonus grade+75%final exam grade,final exam grade)

Retake

Exam:

Written 3h00 hours

Documentation:

Not allowed

Calculator:

Not allowed

Evaluation:

Written exam, 3 hours.